Sydney (Agencies): Apple is working on new versions of the iPhone that will be cheaper and smaller than the latest ones, a media report said on Friday.

The basic objective of the move is to slow the advance of competing handsets based on Google's Android software, according to people who have been briefed on the plans.

One version would be cheaper and smaller than the most recent iPhone, said a source.

Apple also is developing technology that makes it easier to use the iPhone on numerous wireless networks, The Age reported.

Chief executive officer Steve Jobs, who remains involved in strategic decisions while on medical leave, aims to narrow the price distance that has made phones running Android more popular than iPhones.

Google's share of the global smartphone market more than tripled to 32.9 per cent in the fourth quarter in comparison to Apple's 16 per cent, according to Canalys.

Apple has considered selling the new iPhone for about $200 in the US, without obligating users to sign a two-year service bond, said the source.

Natalie Kerris, a spokeswoman for Apple, refused to comment. The prototype was about one-third smaller than the iPhone 4, said the source.

Apple can sell it at a low price mainly because the smartphone will use a processor, display and other components similar to those used in the current model, rather than pricier, more advanced parts that will be in the next iPhone. Component prices typically decline over time.

Apple is also working on dual-mode phone and universal SIM technology to cut the cost of distributing and managing millions of SIM cards.

The new features could also give Apple a gain over mobile carriers in influencing customers. The gadget would be affordable without a carrier subsidy, so buyers wouldn't need to agree to terms, such as termination fees, that carriers demand in exchange for cutting the cost of the phone.

Apple has also worked on redesigned iPhone software that would let customers prefer a network and configure their device on their own, without relying on a store clerk or representative of a carrier, the newspaper said.